Does Directed Innovation Mitigate Climate Damage? Evidence from US Agriculture

105 Pages Posted: 16 Dec 2020 Last revised: 6 Jul 2022

See all articles by Jacob Moscona

Jacob Moscona

Harvard University

Karthik Sastry

Princeton University - Department of Economics

Date Written: July 5, 2022

Abstract

This paper studies how innovation reacts to climate change and shapes its economic impacts, focusing on US agriculture. We show in a model that directed innovation can either mitigate or exacerbate climate change’s potential economic damage depending on the substitutability between new technology and favorable climatic conditions. To empirically investigate the technological response to climate change, we measure crop-specific exposure to damaging extreme temperatures and crop-specific innovation embodied in new variety releases and patents. We find that innovation has re-directed since the mid 20th century toward crops with increasing exposure to extreme temperatures. Moreover, this effect is driven by types of agricultural technology most related to environmental adaptation. We next show that US counties’ exposure to induced innovation significantly dampens the local economic damage from extreme temperatures. Combining these estimates with the model, we find that directed innovation has offset 20% of potential losses in US agricultural land value due to damaging climate trends since 1960, and that innovation could offset 13% of projected damage by 2100. These findings highlight the vital importance, but incomplete effectiveness, of endogenous technological change as a source of adaptation to climate change.

Keywords: climate change, innovation, adaptation

JEL Classification: O31, Q54, Q55, Q10

Suggested Citation

Moscona, Jacob and Sastry, Karthik, Does Directed Innovation Mitigate Climate Damage? Evidence from US Agriculture (July 5, 2022). Available at SSRN: https://ssrn.com/abstract=3744951 or http://dx.doi.org/10.2139/ssrn.3744951

Jacob Moscona

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Karthik Sastry (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
288
Abstract Views
1,681
Rank
197,775
PlumX Metrics